MRV and compliance

Legal assistance paper

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Date produced: 07/12/2009

1. Which specific articles and paragraphs of the Kyoto Protocol deal with: (a) measurement, reporting and verification (MRV) of emission reduction targets; and (b) compliance?

2. Draft text (for MRV and compliance under the LCA negotiations) suggests the following language: “All Annex I Parties to the Convention shall, in accordance with Article 4.2 of the Convention, undertake an ambitious economy-wide binding target for quantified emission reductions from their 1990 level and adopt corresponding policies and actions. (a) For any Annex I Party to the Convention that is also a Party to the Kyoto Protocol, its emission reduction target for the second commitment period under the Kyoto Protocol shall be considered as a commitment under this paragraph. For the measurement, reporting and verification of its emission reduction target, pertinent rules and procedures, including those for compliance under the Kyoto Protocol, shall apply; (b) For any Annex I Party to the Convention that is not a Party to the Kyoto Protocol, its emission reduction commitment shall be comparable to the target referred to in subparagraph 4(a) above. For the measurement, reporting and verification of such a commitment, rules and procedures shall be the same as those of subparagraph 4(a) above. The commitments specified in this subparagraph shall be implemented mainly through domestic measures. The rules and procedures for the use of international offsets shall be further established by the Conference of the Parties.” What could the “pertinent rules and procedures” referred to above be?

3. Can you suggest alternative drafting that would require non-Annex 1 parties (in a new protocol) to comply with similar (or the same) MRV and compliance provisions as exist in the Kyoto Protocol.

1. Identification and summary of MRV relevant articles of the Kyoto Protocol

1.1 MRV provisions and compliance regimes are dealt with separately in the Protocol. The MRV Provisions are in Articles 5, 7 and 8. Guidelines relating to these articles were published by CMP1 at Montreal in December 2005.
1.2 Article 5.1 provides that each Annex 1 Party is to have in place by 2007 a national system for ascertaining domestic greenhouse gas emissions by sources and removals by sinks.
1.3 Article 5.2 provides that where agreed methodologies (that is, the revised 1996 IPCC Guidelines for National Greenhouse Gas Inventories – see decision 2/CP.3) are not used to estimate emissions and removals, appropriate “adjustments” should be applied.
1.4 Article 7.1 specifies that each Annex 1 Party must submit an annual inventory that includes the “necessary supplementary information” for ensuring compliance with its substantive reduction commitments as defined in Article 3.
1.5 Article 7.2 further details that each Annex 1 Party must also include in its national communications the “supplementary information necessary to demonstrate compliance with its commitments under [the] Protocol.”
1.6 Article 7.4 of the Protocol specifies that the annual inventories will be the vehicle by which Parties show their progress toward meeting their emissions targets, while the national communications will demonstrate compliance with overall Protocol commitments. The CMP is scheduled to adopt guidelines for both at its first session.
1.7 Article 8.1 broadens the scope of “in-depth review” introduced by the Framework Convention on Climate Change, to cover submissions of both national communications and annual inventories from Annex 1 Parties.
1.8 Article 8.3 provides that the expert review teams will prepare a report containing a “thorough and comprehensive technical assessment of all aspects of the implementation by a Party of [the] Protocol”. Determination that a Party is having difficulty meeting its Protocol targets will follow from the expert review team’s assessment and identification of “any potential problems” in the fulfilment of commitments.
1.9 Article 8.5 provides that expert review teams are instructed to assess the Party’s implementation efforts and identify any potential problems or factors influencing the fulfilment of its commitments. The reports, together with a list of the implementation questions contained in them, are then circulated by the secretariat to all Parties to the Convention. The CMP, with the assistance of the SBSTA and, if appropriate, the SBI, then considers the original submission of the Party, the review team’s report, and any questions of implementation listed by the secretariat.
1.10 Article 8.6 specifies that the CMP must take any decisions that may be required to assure proper implementation of the Party’s Protocol commitments.
Guidelines pursuant to Articles 5, 7 and 8: CMP 1, Montreal, December 2005:
1.11 The CMP 1 adopted the following decisions relating to Articles 5, 7 and 8 of the Protocol:
(a) 13/CMP.1 Modalities for the accounting of assigned amounts under Article 7, paragraph 4 of the Protocol;
(b) 14/CMP.1 Standard electronic format for reporting Protocol units;
(c) 15/CMP.1 Guidelines for the preparation of the information required under Article 7 of the Protocol;
(d) 19/CMP.1 Guidelines for national systems under Article 5, paragraph 1 of the Protocol;
(e) 20/CMP.1 Good practice guidance and adjustments under Article 5, paragraph 2 of the Protocol;
(f) 21/CMP.1 Issues relating to adjustments under Article 5, paragraph 2 of the Protocol;
(g) 22/CMP.1 Guidelines for review under Article 8 of the Protocol;
(h) 23/CMP.1 Terms of service for lead reviewers;
(i) 24/CMP.1 Issues relating to the implementation of Article 8 of the Protocol – 1 (Training programme for members of expert review teams); and
(j) 25/CMP.1 Issues relating to the implementation of Article 8 of the Protocol – 2 (Confidential information).
1.12 A detailed summary of the provisions of these documents is outside the scope of this note.

2. Identification and summary of Compliance relevant articles of the Kyoto Protocol

2.1 The compliance regime (which is as yet incomplete) was established at COP7 in Decision 24/CP.7, in accordance with Article 18 of the Protocol.
2.2 Article 18 provides that the CMP must “approve appropriate and effective procedures and mechanisms to determine and to address cases of noncompliance…” These will include an “indicative list of consequences” that takes into account the “cause, type, degree and frequency of non-compliance.”
2.3 The use of the word “indicative” in Article 18 implies that the list will only suggest consequences of non-compliance. Specific measures will be subject to further consideration and approval by the CMP before being accepted as a response that can actually be deployed. This interpretation is consistent with Article 18’s requirement that “[a]ny procedures and mechanisms under this Article entailing binding consequences shall be adopted by means of an amendment to this Protocol.”
2.4 Article 16 provides that the Multilateral Consultative Process (“MCP”) “shall operate without prejudice to the procedures and mechanisms established in accordance with [the enforcement provisions of] Article 18,” thus apparently acknowledging that facilitation under the MCP could be separate from the enforcement procedure.
2.5 In decision 24/CP.7 of the Marrakesh Accords, COP7 adopted procedures and mechanisms relating to compliance under the Protocol.
2.6 Accordingly, the Enforcement Branch (as opposed to the Facilitative Branch) of the Protocol will, when it has determined that a party is in non-compliance with Articles 5(1), 5(2), 7(1), and 7(4), issue a declaration of non-compliance and require that the party submit a plan that includes an analysis of the causes of non-compliance, measures that the party intends to implement to remedy the non-compliance, and a timetable for implementing such measures. The party shall also submit progress reports on the implementation of the plan (Annex XV (1), (2) and (3) to the Decision).
2.7 It is, however, provided that the consequences are applied “taking into account the cause, type, degree and frequency of the non-compliance of that party”. This is consistent with Article 18 of the Protocol, which also refers to the “cause, type, degree and frequency of non-compliance”.
2.8 The Enforcement Branch is thus left with discretion, not to decide on other kinds of consequences, but to design the designated consequences to the case at hand. It may even be questioned to what extent the use of these consequences is mandatory at all. The Enforcement Branch may refer a question of implementation to the Facilitative Branch for consideration.

3. Identification and summary of penalties relevant articles

3.1 The Protocol’s enforcement regime is dealt with in the Marrakesh Accords, Decision 24/CP.7, Annex XV.

3.2 The Protocol’s enforcement regime is dealt with in the Marrakesh Accords, Decision 24/CP.7, Annex XV.
3.3 In summary, this states that if a country fails to comply with its emissions target:
3.3.1 the non-compliant country must present a plan demonstrating how it intends to restore compliance with the Protocol;
3.3.2 the non-compliant party must cover its deficit plus an additional 30% in the next commitment period;
3.3.3 the non-compliant party’s eligibility to make transfers under the emissions trading provisions of the Protocol is suspended until that eligibility is reinstated; and
3.3.4 if one or more of the eligibility requirements for participating in the Protocol mechanisms are not fulfilled, the eligibility of the non-compliant country shall be suspended in accordance with relevant provisions under the appropriate articles of the Protocol.

4. Penalties for non-compliance

4.1 Non-compliance with the emission commitment under Article 3 (1): Annex XV (5):
4.1.1 The Enforcement Branch shall declare that the party is in non-compliance with this provision, and shall apply the following consequences:
(A) deduction from the party’s assigned amount for the second commitment period of a number of tonnes equal to 1.3 times the amount in tonnes of excess emissions;
(B) development of a Compliance Action Plan in accordance with certain requirements (Annex XV, paragraphs 6 and 7) in order to re-achieve a status of non-compliance; and
(C) suspension of the eligibility to make transfer as part of emissions trading under Article 17 of the Protocol, until the party is reinstated by the Enforcement Branch in accordance with the procedures in Section X (3) or (4).
4.1.2 The Enforcement Branch shall require the party submit a progress report on the implementation of the Compliance Action Plan on an annual basis (Annex XV, paragraph 7).
4.2 Non-compliance with Measuring, Reporting and Verification (“MRV”) obligations under Article 5 (1) and (2) and Article 7 (1) and (4): Annex XV (1), (2) and (3):
4.2.1 The Enforcement Branch shall issue a declaration of non-compliance and require that the party submit:
(A) a plan that includes an analysis of the causes of non-compliance;
(B) measures that the party intends to implement to remedy the non-compliance; and
(C) a timetable for implementing such measures.
4.3 The party shall also submit progress reports on the implementation of the plan.
4.4 It is, however, provided that the consequences shall be applied by the Enforcement Branch “taking into account the cause, type, degree and frequency of the non-compliance of that party”.
4.5 Non-compliance with eligibility requirements under Articles 6, 12 and 17: Annex XV (4):
4.5.1 The Enforcement Branch shall “suspend the eligibility of that Party in accordance with the relevant provisions under those articles”.
4.5.2 This means that all uses of the flexibility mechanisms are prevented, be they transfer or acquisition of quotas, or use of joint implementation or the CDM.
4.5.3 However, the loss of eligibility only refers to the particular kind of flexibility mechanism with which eligibility requirements are not fulfilled.
4.5.4 Unlike non-compliance with MRV obligations under Article 5 (1) and (2) and Article 7 (1) and (4) discussed above, the Enforcement Branch has no discretion to take into account “cause, type, degree and frequency of non-compliance”.

5. “Pertinent rules and procedures”

5.1 The “pertinent rules and procedures” referred to in article 4(a) of the draft of Query 36 would appear to be those relating to subsequent decisions by the Conference of the Parties serving as the meeting of the Parties to the Protocol (“CMP”). These apply exclusively to Annex 1 Parties and their scope has been further explained in section 3 above.
5.2 As each incident of non-compliance will turn on its own facts, it is difficult to predict how widely or narrowly these rules will be applied and interpreted in individual cases.

6. Proposed drafting

6.1 We have been asked, to suggest alternative drafting that would require non-Annex 1 parties (in a new protocol) to comply with similar (or the same) MRV and compliance provisions as exist in the Kyoto Protocol.
6.2 The drafting referred to in the query already appears to extend the application of the MRV regime of the Protocol and subsequent decisions by the CMP to a party to the UNFCCC but not the Protocol, as paragraph 4(b) of the text provided states that the MRV rules and procedures will apply to an Annex 1 non Kyoto Protocol party in the same way as they do to Annex 1 Kyoto Protocol parties under paragraph 4(a).
6.3 Therefore, paragraphs 4(a) and (b) of the text excerpt provided appear to achieve MRV/compliance.

6.4 The following drafting could be included to achieve this objective: “The Enforcement Branch shall have at its disposal powers to impose substantive penalties for failure by a Party to achieve its emissions targets or to comply with its measurement, reporting and verification obligations, including the power to increase its emissions reduction targets, suspend its eligibility to participate in emissions trading or the clean development mechanism, and require it to submit an action plan for remedying the relevant non-compliance”.